The saying “if you’re not paying for the product, you are the product” no longer brings a smile to anyone’s face, but instead just highlights the increasingly exploitative nature of social media monetization. The expectation that everything on the Internet is free and the subsequent over-focus on advertising to address the revenue challenge is starting to break down, most specifically with the increasing adoption of mobile which is a less attractive engagement platform for advertisers. Privacy concerns around user’s data is further exacerbating the problem. So… maybe its time to change the revenue paradigm and come up with new approaches to building businesses around social networks.

LinkedIn is a great example of a company which has gone this route, and focused on identifying value services with customers willing to pay for them, and in this way have been able to build a more robust and diverse revenue stream. Market comparisons between LinkedIn vs. Facebook, as an example, definitely highlight the weaknesses associated with a pure advertising strategy. In addition, this LinkedIn model is much more transparent in terms of what the service is actually delivering and hence how the data of the “free users” is being used.

It would be nice to see these types of specialists networks evolve where they focus on delivering clear value, with more transparency around the value and the monetization of the network.

4 Comments to “From ads-only 2 value-add”

I agree with you very much on this. It seems to me that a few years ago we were ok with the unknown of how a social network ads value. Now we are at a stage where we still don’t understand how to effectively leverage it but we need to show results so we resort to ads. Ads give us a metric we can understand even though it may suck and not be the most productive method. This is an issue for businesses leveraging these platforms as well as the platforms themselves.

Yep, it will be really exciting for everyone in social networking (businesses and consumers) as these new value-add services start to roll out, as I am predicting they will. The only question is what sorts of services targeting what business problem.

The business issue is, of course, monetization. The social issue is about the bargain we make in sharing prsonal information for some – often unknown – benefit. The IT issue is Big Data – whatever that meme means. But the real issue, in my opinion, is how social networking can help address climate change, corruption – government, business or criminal (http://www.b-eye-network.com/blogs/devlin/archives/2012/07/big_data_big_mo.php) – and other world-impacting and life-threatening challenges of our time…

The citizen in me definitely agrees, but the pragmatist recognizes that we won’t get the social impact if someone doesn’t fund the infrastructure and therein lies the challenge. However, I also like to believe there are valuable services that can be monetized that allows social media channels to continue to be funded without exploitation or manipulation. But, maybe that’s just me wanting my cake and eat it too :-)